Rise of loonie is no boon -- or is it?

Published 10:00 pm, Wednesday, June 6, 2007

MONETARY ornithologists are scanning the skies for signs that a certain species is visiting these parts in ever-larger flocks: the Canadian loonie.

At the same time, they're seeing indications that another species of currency -- the Yankee greenback -- doesn't seem to fly as far or as high as it once did.

That the Canadian dollar is rapidly approaching par with the American dollar, and may soon be worth more, is a new experience for many, and a bit of a shock for those who recall just a few years ago when one Canadian dollar fetched less than 70 cents U.S.

For those with long-enough memories, however, it's not new. In the late 1960s, the Canadian dollar was worth more than its American counterpart.

But does that represent a bit of nostalgia -- or an unpleasant flashback?

That question leads to a much larger issue about money: whether a "strong" currency is preferable to a "weak" currency. The answer to that question, to return to our avian metaphor, may depend on which end of the binoculars you're gazing through -- and what you're staring at.

If you're a traveler, for example, your opinion on the news depends on which direction you're headed. Americans accustomed to enjoying an exchange rate-enhanced weekend getaway in Vancouver, B.C., have found their bargains swept away by the shift in values.

That ought to mean, conversely, that more Canadians will be venturing south for shopping and tourism, which in turn ought to be great news for markets such as Bellingham and Whatcom County.

For evidence, Hodges points to a graph on the center's Web site that plots southbound border crossings in Whatcom County versus the exchange rate. From about early 2003, the Canadian dollar has been steadily climbing in value against the American dollar. Yet border crossings have been essentially flat over that period.

How come? "The retail stores people used to come down for are now up there," Hodges says. And the retail sector in Vancouver "is not going to watch all that money go south" without trying to keep it home with sales and other enticements.

"We're going to get some (gain)," he adds, but the old rule of thumb that every penny gain in the Canadian dollar neatly translates into some specific gain in Canadian visitors seems to have gone away.

Another big sector that could be affected is energy. Americans buy a lot of their energy from Canada, in the form of natural gas, electricity and oil. A more expensive Canadian dollar means more expensive energy for American buyers.

But here again, the effect isn't as obvious as might first appear. Puget Energy spokesman Roger Thompson says that the utility's natural gas contracts, for example, are denominated in U.S. dollars. Should a Canadian company decide to raise the price to reflect the difference in exchange rates, suppliers from other regions such as the Rocky Mountains might offer natural gas at a price that undercuts that competing bid.

"The market will step in and find equilibrium," he says.

The American economy might actually benefit in the energy sector from a more expensive Canadian dollar in one respect. Seattle Industry magazine, published by the Manufacturing Industrial Council of Seattle, devotes a good chunk of its current issue to the boom in the Canadian economy, particularly in the western portion of the country.

That boom is fueled by energy development, in the form of oil sands and natural gas. All that development takes a lot of equipment and supplies to accomplish -- stuff that can be bought in the United States, at increasingly attractive prices thanks to gains in the Canadian dollar. "No way that's not going to impact us down here," says the manufacturing council's executive director, Dave Gering.

And that gets us back to the question of why we would want a strong currency anyway, outside of the grumbling of a few tourists whose lunch in Vancouver or dinner in London just got more expensive.

One reason for a strong currency is for the stuff we buy beyond our borders -- big-screen TVs, laptop computers, clothing, cars, oil. A weak dollar makes those imports more expensive. On the other hand, a weak currency may reflect the rest of the world's view of growth prospects, but it also presents an opportunity for job creation through export growth.

That sort of inconclusive conclusion is what infuriates people about economics. Nevertheless, whether the Canadian dollar's gains against the U.S. version is good news depends on personal perspective.

To some of you, those larger flocks of stronger Canadian loonies may be as attractive as turkey vultures. Others, however, will say the resemblance is much closer to bluebirds of happiness.